Loudcloud, Inc

Gale Encyclopedia of E-Commerce
COPYRIGHT 2002 The Gale Group Inc.

LOUDCLOUD, INC.

Loudcloud, Inc. was founded in September 1999 by some of the Internet's earliest innovators, including Netscape Communications Corp. co-founder Marc Andreessen and former Netscape and America Online (AOL) executive Ben Horowitz. Other members of the founding team included Tim Howes, who co-invented the Lightweight Directory Access Protocol (LDAP), which became the Internet standard for directories; and Sik Rhee, who designed the Kiva application server. All four members of the founding team worked together at Netscape and then at AOL after Netscape was acquired by AOL and Sun Microsystems. Horowitz was the executive in charge of AOL's e-commerce platform division and oversaw the development of [email protected], the Internet's largest shopping destination.

Loudcloud offers a complete solutions package for companies to outsource their global Internet operations. The company stresses that it is not simply an Internet consulting firm, an application service provider (ASP), or a data center provider. Rather, it describes itself as a software infrastructure service provider. Beyond hosting or managing services, Loudcloud provides the technology to automate the operations environment to give customers reliability, efficiency, and performance in a single solution. Thus, while Loudcloud sells a service, it is the company's own Opsware automation technology that makes its service so powerful; and the Opsware software is not sold as packaged software.

Companies who have outsourced some or all of their Internet operations to Loudcloud include America Online (AOL), for whom Loudcloud is a preferred provider of e-commerce technologies, including the merchant portion of AOL's QuickCheckout wallet technology and future shopping technologies. In March 2001 Loudcloud announced that the News Corporation—owned Web sites Foxsports.com, Foxnews.com,
and Fox.com would be deployed, scaled, managed, and monitored using Loudcloud's Opsware automation technology. That same month Loudcloud added USAToday.com to its list of customers.

By providing solutions for outsourcing global Internet operations, Loudcloud enables its customers to focus on the key business decisions that will give them a competitive advantage instead of spending their time making thousands of technical decisions. While data centers provide basic Web-hosting services and Internet consulting firms help companies design their top-level customer application, Loudcloud provides a complete infrastructure solution. Outsourcing their Internet operations to Loudcloud frees companies from the need to hire talented operations personnel to manage their Web site; the need to procure the right hardware, software, storage, and networking components; the need to deploy a secure operational environment; the need to monitor the site on a 24/7 basis and keep it up and running; and the need to scale the site by adding capacity and functionality as business grows.

LOUDCLOUD'S CORE SOLUTION

Loudcloud's core solution is called the Loudcloud Operational Environment (LOE). The LOE includes all of the technology, expertise, and services necessary to architect, deploy, manage, and continually grow a customer's Internet operations. Loudcloud has organized the LOE into four components: Readiness Services, Deployment Services, Global Support Services, and Opsware automation technology.

Readiness services include everything a company needs to create a reliable, scalable, and secure architecture. Client companies benefit from Loudcloud's expertise in product selection, which utilizes technologies and services approved by the Loudcloud Research team. Sites that are designed by Loudcloud and built on technologies certified by Loudcloud Research are backed by a 100 percent scheduled-uptime guarantee.

Deployment services include the configuration, preparation, testing, and implementation services needed to deploy a client's Web site within the LOE. Loudcloud provides customers with a single point of contact for project management by assigning a dedicated project engineer to each customer deployment. The project engineer, in turn, coordinates a team of experts that includes a consulting engineer, a network engineer, a database administrator, a systems administrator, a systems engineer, an account manager, and a site operations engineer. Loudcloud's deployment services can take a new operational environment live in as little as six weeks.

The next basic component, global support services, keeps the client's site running on a 24/7 basis through Loudcloud's Network Operations Center (NOC). Service level agreements (SLAs) are provided to ensure that NOC engineers not only monitor Internet operations, they also take immediate action to remedy any outstanding problems.

The core foundation of the LOE is Loudcloud's proprietary Opsware automation technology. Opsware automates many of the tasks associated with the deployment, support, and growth of Internet infrastructure. The software integrates several functional components into a single technology, including server provisioning and configuration, network provisioning and configuration, monitoring and security framework, change management and maintenance, code deployment, failure recovery, operational audit, and more.

SMART CLOUD EXPANDS THE LOUDCLOUD OPERATIONAL ENVIRONMENT

Loudcloud also offers client companies a choice of four optional Smart Clouds that expand the LOE. Each Smart Cloud includes licenses, hardware, software, deployment, and 24/7 monitoring and management. They include industry-leading technologies and services that have been certified by Loudcloud Research. Customers can purchase the appropriate combination of Smart Clouds to match their own needs. The four Smart Clouds are Enhanced Environment, Enhanced Performance, Enhanced Development, and Enhanced Risk Management.

Enhanced Development Smart Clouds provide customers with development and evaluation tools that enable them to develop, test, and qualify their Web site applications and code. Loudcloud offers customers the RapidBuild Cloud, which provides them with a solid development environment for testing and qualifying new content and code, as well as the Stress Cloud, which enables customers to test if their site can withstand the pressure and demands of different levels of Internet traffic.

Enhanced Performance Smart Clouds provide client companies with performance evaluation tools to
help them improve their end-users' Web site experience. Included among this group of Smart Clouds is the Global Response Cloud, which lets customers monitor and measure their site performance from up to 50 metropolitan areas around the world. The Transaction Response Cloud gives customers the ability to monitor and measure the performance of their site in real time. The Content Distribution Cloud accelerates site performance by caching static media on geographically dispersed servers which, in effect, put content closer to end-users. The Streaming Cloud allows customers to provide high-quality video-on-demand content on their sites.

Enhanced Risk Management Smart Clouds are a collection of enhanced security tools for customers with specialized needs. Among the areas for which enhanced security tools are offered are access control, e-mail, global recovery, and file transfers.

LOUDCLOUD GOES PUBLIC

When Loudcloud officially opened for business in February 2000, it had seven customers and $68 million in venture capital financing. By mid-2000 the company had raised another $120 million in capital. In September 2000 Loudcloud expanded into the European market by opening offices in London, Paris, and Munich.

On March 9, 2001, Loudcloud held its initial public offering (IPO). The investment climate for Internet-based companies was not favorable, however, and the company had to lower its initial offering price. Instead of selling 10 million shares at $10 to $12 a share, Loudcloud had to sell 25 million shares at an offering price of $6 in order to raise the necessary $150 million.

For the fiscal year ending January 31, 2001, Loudcloud reported revenue of $15.5 million. Its proforma net loss for the year was $94.7 million, excluding non-cash amortization associated with deferred employee stock compensation and a non-cash preferred stock dividend. The company's fourth quarter revenue increased 94 percent over third quarter revenue, from $4.6 million to $8.9 million.

At the end of the first quarter of fiscal 2002 Loudcloud announced initiatives to achieve a fully-funded business plan. Cost-cutting measures that were taken included a workforce reduction of 19 percent, representing 122 employees and resulting in a scaled back workforce of 507 employees. Following the cutbacks the company planned to continue to focus on customer sales, support, and satisfaction, as well as its core research and development efforts, while scaling back on other Internet support functions.

FURTHER READING:

"All Together Now." The Economist (U.S.), April 14, 2001.

"Andreessen Launches Loudcloud." The Business Journal, February 11, 2000.

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